Form 2106-EZ: Unreimbursed Employee Business Expenses Overview
In 2018, all unreimbursed employee expenses were eliminated under the Tax Cuts and Jobs Act. Unreimbursed employee expenses are job-related expenses that an employee paid for out-of-pocket. Through the 2017 tax year, only Form 2106-EZ: Unreimbursed Employee Business Expenses was utilized.
But what exactly is Form 2016-EZ? And what was its purpose?
Read on as we take you through what Form 2016-EZ was, what its purpose was, who could file it, and why it was eventually discontinued in 2018.
Table of Contents
- Employees used Form 2106-EZ to deduct unreimbursed costs associated with their employment such as travel, lodging, and automobile expenses
- After the Tax Cuts and Jobs Act eliminated all unreimbursed employee expense deductions in 2018, this form is no longer used
- The complete Form 2106 Employee Business Expenses is still accessible to taxpayers in a small number of occupations to whom the deductions are still available
What Was Form 2106-EZ?
Form 2106-EZ: Unreimbursed Employee Business Expenses was an IRS tax form. It was made available to employees who wanted to write off regular, required costs associated with their jobs that were not reimbursed by their employer.
For the majority of taxpayers, the Tax Cuts and Jobs Act (TCJA) practically abolished any deductions for unreimbursed employee expenditures. As a result, after the tax year 2017, Form 2106-EZ: Unreimbursed Employee Business Expenses was no longer in use.
What Was the Purpose of Form 2106-EZ?
Employees seeking a tax deduction for unreimbursed expenses related to their jobs used Form 2106-EZ. This was a simplified version of Form 2106.
Expenses that are typical and accepted in a certain industry were defined as ordinary expenses. Expenses that are essential in order to conduct business are referred to as necessary expenses.
Employees were able to claim the deduction only if they were not reimbursed by their employee. Only if the company did not reimburse the expense could an employee claim a deduction. Employees who submitted this form were qualified to deduct automobile expenses at the standard mileage rate.
Who Could File Form 2106-EZ?
You could claim your unreimbursed employee business expenses using Form 2106-EZ rather than Form 2106. This was if you met all of the following criteria:
- You are an employee that deducts ordinary and necessary expenses* that directly relate to your job or business.
- You are utilizing the 2017 standard mileage rate for deducting car expenses.
- Your employer does not compensate you for any costs. Amounts your employer included in box 1 of your Form W-2 are not considered reimbursements for this purpose.
*As an employee, you have the right to deduct costs directly related to your employment. A common and recognized expense in your line of work, business, or profession is one that qualifies as ordinary. A cost that benefits and is appropriate for your business is one that is necessary. A cost need not be required in order to be deemed necessary.
How to File Form 2106-EZ
There are three steps to filing form 2106-EZ:
1. Enter Your Expenses: Enter your authorized expense budget in dollars. The amount of the qualified reimbursement shouldn’t be included in your income by your employer. This is because it is viewed as having been paid under an accountable plan.
2. Enter Any Reimbursements You Have Received: These are reimbursed expenses from your employer for the step 1 expenses. Amounts your employer included in box 1 of your Form W-2 are not considered reimbursements for this purpose. And any that you didn’t receive a report of in box 1 of your Form W-2. This includes reimbursements reported in box 12 of Form W-2. This was under code “L.”
Amounts reported under code “L” are reimbursements you got for company costs that weren’t reported as wages on Form W-2. This is because the expenses were substantiated in accordance with strict IRS guidelines.
3. Figure Expenses To Deduct: The standard deduction for business meals, including those eaten while traveling for work, is 50%. In general, meals that are not specified apart from entertainment are not deductible. However, any meals provided for business purposes by a restaurant are fully deductible. Only meals purchased or incurred after December 31, 2020, and prior to January 1, 2023, are covered by this.
What Were the Deductions in Form 2106-EZ?
Two sections made up the form. Part I totaled all employee business costs and determined which ones—and how much of them—were tax deductible. Part II dealt with vehicle expenses in more detail.
Employees were required to disclose any unreimbursed business expenses in Part 1. This included any personal vehicle expenses from Part II, as well as travel, housing, parking, tolls, and car rentals. For valet tips and other modest monetary transactions that ordinarily don’t result in receipts, so-called incidental costs were also allowed a deduction. The majority of taxpayers were only permitted to deduct 50% of these costs. This meant that meals and entertainment were reported separately.
Current and prior year per diem rates can be found on the U.S. General Services Administration website. Foreign per diem rates are listed on the U.S. Department of state website. These were the two other methods for figuring out overnight charges.
Depending on the supply and demand in a particular area, lodging costs may differ significantly from month to month. This could be due to factors such as holiday seasons, peak tourist seasons, and other varying factors.
The personal vehicle expenses that must be claimed using the standard mileage rate were covered in Part II. This required dividing the number of miles traveled for business purposes by the IRS mileage rate for the tax year. The mileage rate takes into account gas prices, repair costs, and wear and tear on a typical car.
The use of a personal automobile for business-related tasks is still allowable. This is under the tax rules for self-employed taxpayers. It decreased from 57.5 cents for the 2020 tax year to 56 cents for 2021. For 2022, the standard mileage rate increased to 58.5 cents per mile.
Taxpayers may still deduct costs associated with using their automobiles. Though this is purely for medical and charitable purposes. The IRS has separate mileage rates for medical and charitable purposes. Active military personnel are the only ones who can now claim a tax deduction for using a personal vehicle to travel for work.
Why Is Form 2106-EZ Discontinued?
Form 2106-EZ is no longer used. The Tax Cuts and Jobs Act eliminated all unreimbursed employee expense deductions in 2018.
This form is still accessible via the IRS, but it is no longer used by anyone. However, the full Form 2106 can still be downloaded and filled out from the IRS website.
Employees who sought to deduct routine, necessary charges related to their jobs were given access to the government official Form 2106-EZ: Unreimbursed Employee Business Expenses, by the IRS.
Even though the 2106-EZ is no longer in use, some populations that are eligible for the deductions can still use the longer Form 2106. These include members of the Reserve Component of the Armed Forces, performers, fee-based state and local government employees, and workers who incur work-related expenses due to an impairment.
FAQS on Form 2106-EZ
What Form Do I Use to Report Unreimbursed Employee Expenses?
If you were obligated to pay these costs by the partnership agreement, you can claim any unreimbursed ordinary and necessary partnership expenses you paid on the partnership’s behalf on Schedule E, according to the IRS. This deduction can lower your income which is subject to self-employment tax and is reported on line 28 of Schedule E.
What Qualifies as Unreimbursed Business Expenses?
Any expenditure you make for work-related purposes that is both regular and reasonable and is not reimbursed by your employer is considered an unreimbursed business cost.
Can I Deduct Home Office Expenses if I Am an Employee?
To qualify for a business use of your home deduction, you must use part of your home exclusively and regularly as your principal place of business (a place where you meet or deal with customers in the normal course of your business).
Do You Have to Itemize to Deduct Unreimbursed Employee Expenses?
You can no longer claim any miscellaneous itemized deductions that are subject to the 2% of AGI limitations, including unreimbursed employee expenses. You may be able to deduct certain unreimbursed employee expenses if you fall into one of the specific categories of employment, such as Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses.
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